VVS 2022 Shifting Global Capital Flows Report

1. Southeast Asia Exit Landscape Report 2.0
Vietnam Venture Summit Report
Hanoi, 19 Dec 2022
Unlocking a New Golden Era for Southeast Asia in the World

2. Southeast Asia Exit Landscape Report 2.0

3. Southeast Asia Exit Landscape Report 2.0

4. Southeast Asia Exit Landscape Report 2.0

5. Executive Summary
2021 was a record-breaking year of the ‘gold rush’ for fundraising in SEA. Startups in the region raised
a record $25.7B[1]
– more than double the previous year due to cash-rich global investors. Southeast
Asia- focused VC funds have raised US$3.03B as of H1 2022, surpassing the total raised compared to
last year.[2]
However, six months into the year, the global macroeconomic environment started to shift.
Headlines about geopolitical tensions and the deep impact of China’s long-drawn zero-COVID policy,
which has just recently ended, along with layoffs among tech startups, started to dampen the mood.
Despite this, investors can view this turbulent macroeconomic environment as the perfect time
for this new golden era of Southeast Asia.
The World Economic Outlook in 2022 from the International Monetary Foundation (IMF) paints a
bright future ahead for Southeast Asia vs other markets around the globe. Emerging and developing
Asia is predicted to witness a historical high of GDP growth of 4.9% in 2023. On the other hand, other
global key regions, such as Europe, the US, Latin America and the Caribbean is displayed to have a
projected decrease in GDP growth[3]
.
This raises the question as to how the global economic environment is pushing investors to the
region. How has the region matured through the pandemic? How are SEA markets positioned to
take advantage of the global headwinds? Is this ‘golden’ streak here to stay?
This report tackles these questions and explores the factors that are driving SEA’s continued success
in attracting global capital inflows, delving into the opportunities presented in the region’s three
leading markets – Vietnam, Singapore and Indonesia – and how this ‘golden triangle’ will contribute
to be the region’s leading competitive edge.
[1]
https://asia.nikkei.com/Spotlight/Market-Spotlight/Gold-rush-ASEAN-startup-fundraising-more-than-doubled-in-2021
[2]
https://asia.nikkei.com/Spotlight/Market-Spotlight/VCs-raise-record-funds-for-Southeast-Asia-India-as-money-leaves-China
[3]
https://www.imf.org/en/Publications/WEO/Issues/2022/10/11/world-economic-outlook-october-2022
[3]
The Asean Secretariat
The combined power of Vietnam,
Singapore and Indonesia made
Southeast Asia a magnet for the
influx of foreign direct investment
of US$174 billion in 2021[4]
Vinnie Lauria
Founding Partner of
Golden Gate Ventures

6. Shifting Global
Capital Flows

7. Shifting Global Capital Flows
Southeast Asia raising record funds as investors shift from China
ASEAN-focused VC funds have raised US$3.03 billion so far as of H1 2022, surpassing the total raised
compared to last year.
These regions have emerged as attractive markets due to the fast growth nature of startups in recent years,
resulting in a series of listings like Singaporean and Indonesian super apps Grab and GoTo respectively.
In contrast, fundraising by China-focused VCs fell sharply from US$27.2B in 2021 to just US$2.1B as of Q2 2022.

8. Shifting Global Capital Flows
SEA’s VC funding remains strong amidst macroeconomic headwinds
China’s VC funding activity has fallen sharply this year, sliding to the lowest since 2012, falling 34% YoY
from 2018, with Southeast Asia’s number of funds surpassing China’s in mid-2018 and fundraising
amount in 2020. Southeast has grown 45% YoY since 2012.
Source: Nikkei Asia, Preqin Pro (2022)
Southeast
Asia
China
SEA: +45%
YoY
C
h
i
n
a
:
-
3
4
%
Y
o
Y
Southeast Asia v.s. China (Fundraising Amount)

9. Rise of FDI into Southeast Asia from the US
● FDI from the top 10 sources accounted for 74% of investment
into ASEAN in 2021.
● FDI from the US was the largest source, surging by 41% to
US$40B due to significant investments into sectors
surrounding banking and finance, pharmaceutical,
biomedical and electronics.
ASEAN takes FDI lead over China
● Within developing Asian markets, China’s market share of
greenfield FDI projects has shrunk gradually over two
decades compared to its regional competitors.
● The country’s market share now stands at only 26.6% in 2022
compared to 69.6% back in 2003.
ASEAN FDI Inflows by top 10 investors (in US$ billions)
Market share (%) of greenfield FDI projects between
January 2003 and July 2022
Source: The ASEAN Secretariat and United Nations (2022)
Source: fDi Markets (2022)
Shifting Global Capital Flows

10. Shifting Global Capital Flows from the U.S.
Southeast Asia’s meteoric rise in investments from the U.S.
USA
ASEAN
China
US$ 118.2 billion (2021)
US$ 115 billion (2020)
US$ 40 billion (2021)
US$ 28 billion (2020)
ASEAN: +41% ↑
China: flat
Source: The ASEAN Secretariat, China Briefing, Statista (2022)

11. Between 2010 and 2019, the GCC’s trade with emerging Asia has
expanded rapidly, growing from US$247B to US$336B.
By 2030, trade value is set to reach roughly US$578B, surpassing the
trade with advanced economies by 2028 at current growth rates.
Compared to Western trading partners, China is becoming more
important to the GCC, with trade connections increasing since COVID.
Importantly, GCC-China trade has never been higher; China replaced
the European Union in 2020 as the GCC’s largest trading partner,
representing a significant geopolitical shift.
GCC Trade with Emerging Asia (in US$ billions)
Source: Asia House (2022)
+36%
+72%
GCC-China Trade and GCC-EU Trade in 2020 (in US$ billions)
Source: Asia House (2022)
Shifting Global Capital Flows
The Gulf & the Middle East
sees record-high investments

12. Shifting Global Capital Flows from the GCC
GCC
ASEAN
China
The Middle East pivot to Asia as bilateral trade values soar
US$ 85.2 billion (2021)
US$ 13.4 billion (2016-2020)
China: +53.7%
US$ 248 billion (2021)
US$ 161.4 billion (2020)
ASEAN: +535.8% ↑
Note: Line thickness reflects growth rate
Source: Asia House, Emirates News Agency, Atlantic
Council, House of Commons UK Parliament (2022)

13. Emerging &
Developing
Asia
13

14. 2023 Emerging and Developing Asia
IMF forecast: Southeast Asia as an engine of global growth
“The three largest economies – the United States, China and the Euro area – will continue to stall,” IMF chief economist
Pierre-Olivier Gourinchas said. For many economies, a recession is inevitable, but growth outlooks for emerging and
developing Asia displays positive, increasing growth with Southeast Asia being a prime example…
Source: International Monetary Fund (2022)

15. Southeast Asia
Macroeconomic conditions
Despite unfavorable SEA and global macroeconomic
conditions, Southeast Asia’s growth outlook is still positive.
● While the first decade of SEA’s startup ecosystem
faced bullish growth, 2022 is the “Golden Era” for a
still developing ecosystem;
● The global challenges are now pushing SEA to
develop in a different direction characterised by
sustainable growth: SEA-born regional businesses
and second-generation founders from Vietnam,
Indonesia and Singapore are each taking a pole
position for different industries in the ecosystem,
ranging from financial services and logistics to
enterprise software and healthtech
Southeast Asian real GDP growth projections, indexed to 2011
Source: Bain & Company, Monk’s Hill Ventures (2022)
FDI share of total investments and FDI growth rate across peer regions

16. The Golden
Triangle
16

17. Golden Triangle
Accelerated Digitization & Growth
Powering asia’s consumption
engine: Domestic consumption is
forecast to increase 20% per year,
poised to be Asia’s next significant
consumption driver.
Rising digital demand post
pandemic: Rapid emergence of
digital consumers fueling changes in
purchasing behaviors.
Massive Domestic Consumer Market
SEA’s most populous nation poised
for continued strong growth:
Population forecasted to reach 321
million by 2050, with >25% between
14-20 years old in 2020.
Robust digital penetration: Over 21
million new digital consumers added
over the pandemic; 72% from
non-metro areas.
Global Talent Pool & Access
Ranked 2nd in the Global Talent
Competitiveness Index: The city-state
jumped 10 places in global rankings to
clinch the 8th most attractive location
for global talent last year.
Top-notch education system: 30% of
its workforce hold a university degree,
and another 15% have earned a
diploma or professional qualification.
US$5B
GMV
Revenue
US$382M
YoY
+26%
YoY
+143%
Revenue
US$375M
YoY
+33%
YoY
+30%
GMV
US$10B
Source: Grab, GoTo, Data As of Q3 2022
Singapore Indonesia Vietnam
Notable VN Comps

18. Golden Triangle
Southeast Asia’s Recent Growth
South East Asia saw FDI rise 44% to US$175B by end of 2021, with Singapore, Indonesia, and Vietnam spearheading the
growth for FDI in developing Asia. The rise was underpinned by strong investment in manufacturing, the digital
economy and infrastructure.
Singapore, the sub region's largest recipient, saw inflows up by 31% to US$99B, driven by a jump in cross-border mergers
and acquisitions (M&As), followed by Indonesia at US$20B and Vietnam at US$16B.
FDI inflows in the Golden Triangle (in US$ billions) ASEAN share of global FDI inflows, before and during the pandemic (in %)
Source: The ASEAN Secretariat and United Nations (2022)

19. Singapore
Deal value grew from ~US$4B in H1 2021 to
~US$7B in H1 2022, crowning Singapore as the
region’s most favoured investment country.
GMV of Singapore’s digital economy grew 22% YoY,
reaching US$18B in 2022, with expectations to hit
~US$30B by 2025.
This strong growth is mainly driven by ~US$9B in
travel recovery and the ~US$11bn e-commerce sector.
With 97% of Internet users also being digital service
consumers, the city-state’s penetration rate still
remains highest in the region.
“Singapore remains an attractive global hub for alternative or private
capital, with investments by venture capital and private equity funds
reaching levels that surpassed the pre-pandemic period over the past
two years”
Source: Google, Temasek and Bain & Company (2022)

20. Indonesia
Deal count remains constant but deal value dips by
~US$2B YoY as investors prioritise profitability and address
concerns surrounding valuations of late-stage companies
“In 2022, Indonesia, along with Singapore, will be the top two investment destinations in Southeast Asia. Indonesia has
attracted 25% of the total value of private funding in the region and in the long term, it will remain attractive to
investors along with Vietnam.”
Similar to Singapore, GMV of Indonesia’s digital economy also grew 22%
YoY, reaching US$77B in 2022, and expected to hit ~US$130B by 2025.
Growth is primarily expected to be held within the E-commerce sector, as
Indonesia continues to be the most vibrant digital services market in the
region, attracting strong global capital inflows.
Source: Google, Temasek and Bain & Company (2022)

21. Vietnam
“Venture investors are eyeing Vietnam as the latest
destination for their capital, as the nation draws many
comparisons with that of Indonesia and China from years back”
According to the National Innovation Centre (NIC), Vietnamese
startups raised a record US$1.4B across 165 deals in 2021.
This represented a 1.6x growth, up from US$894M and 126 deals
in 2019, indicating that dealmaking in the market has regained
momentum following a drop due to the Covid-19 pandemic
Vietnam only ranks 3rd behind Singapore and Indonesia of
the total share of capital invested in SEA, with an increase of
5 percentage points compared to 2020. For example…
Samsung is to invest US$20 billion into Vietnam as
incentives to invest in the country has risen given disruptions
in China’s supply chain from their zero-COVID-19 policy.
Share of Capital Invested by Country
Capital Invested and Deals Done
Source: Do Ventures, NIC, and Cento Ventures Research (2021)

22. Vietnam
Owing to greater opportunities with effective supply chain integration, greater free trade access, and cheaper prices over
land purchasing rights, labor wages, and operational expenses for factories/warehouses, Vietnam could potentially replace
China as the global factory in the near future, especially with China’s rise in geopolitical tensions and pandemic shutdowns.
Source: TrendEconomy (2020)
* Estimated from 9.6% YoY Growth Rate in 2021
Seen as a key electronics exporter, Vietnam jumped from
a modest 47th place in 2001 to 10th place by 2020. The
country’s Electronic Industry (EI) exports value equal to
1.8% of the global value of electronics exports.
Vietnam Electronics Industry (EI) Export
Shifting manufacturing driving growth
Tech companies shifting production into Vietnam

23. Vietnam
By 2024, Vietnam’s GDP per capita is projected to match Indonesia’s. The country’s current 5-year plan, running from
2021 to 2025, emphasizes the continuance of the current economic development model. Manufacturing, along with the
shifting global capital flows to Vietnam, will continue to underpin growth, which will be aided by deeper integration into
global supply chains, the pursuit of trade alliances, and export diversification.
GDP per Capita of Vietnam v.s. Indonesia
Vietnam’s growth outlook remains stronger than ever
Source: The World Bank, VIR (2022)

24. Indonesia alone, by 2025 will
more than double its GMV
and by 2030, could potentially
be 2x SEA’s GMV today.
While Vietnam will almost
triple its GMV by 2025 and by
2030 it could grow 11x to
become a $220 billion digital
economy.
Golden Triangle GMV by 2025
Golden Triangle GMV by 2025
Indonesia
Source: Google, Temasek and Bain & Company

25. Mr. Vu Quoc Huy
General Director, Vietnam
National Innovation Center (NIC)
“A thriving startup ecosystem in Vietnam is an important pillar for driving the country’s wider innovation
and digital transformation agenda - to continue to strengthen our economy and achieve long-term
sustainable growth. The Vietnam Venture Summit is one of the cornerstones for bringing together the
ecosystem players and the Vietnamese government to set the growth agenda for a sophisticated startup
ecosystem, bringing together lessons from the global community and insights of the inherent strengths
of the Vietnam environment. This year’s Summit is the largest yet and reflects the growing interest and
partnership with the global investment community. The growth we are seeing now in Vietnam comes
from a strong foundation that has been years in the making. We are building for the long-term and
poised not only for quick wins today, but sustainable growth.”
Vietnam Venture Summit: Outlook
Mr. Will Longhurst
Head of Business Development
of HSBC Singapore
“South & South East Asia is an incredibly exciting region for innovation, startups and fast-growth names
looking to raise capital, develop their technology & products, or scale their business models. The concentration
of talent, access to fast-growing and demographically exciting markets, and an increasing number of
investors is driving a fundamental shift in capital flows. At HSBC we are committed to supporting the
emerging giants of tomorrow throughout South & South East Asia – whether this is through accessing new
markets, transactional banking, or the provision of lending and liquidity solutions. Over the past 18 months,
we have launched early stage lending funds in Singapore and India– and are focused on deepening this
coverage over the coming months. This includes supporting exciting names in Vietnam, Indonesia and
beyond. The opportunity across the region represents one of the most exciting investment opportunities
globally, and HSBC is well positioned to help support the ecosystem in its next phase of growth.”

26. Sources
Reports
● ASEAN Investment Report 2022. The ASEAN Secretariat, United Nations
● E-Conomy SEA 2022 Report. Temasek, Google, and Bain & Company
● Southeast Asia’s Pursuit of the Emerging Markets Growth Crown. Bain & Company, Angsana Council
● 2022 Southeast Asia Data Insight. Global Private Capital Association
● Preqin Territory Guide: ASEAN 2022: Preqin
Blogs/Articles:
● https://asia.nikkei.com/Spotlight/Market-Spotlight/VCs-raise-record-funds-for-Southeast-Asia-India-as-money-leaves-China
● https://quoteddata.com/2022/06/fishing-asian-fund-china-vietnam/
● https://unctad.org/news/foreign-investment-developing-asia-hit-record-619-billion-2021
● https://www.globalprivatecapital.org/app/uploads/2022/09/mena-2022-final.pdf
● https://asiahouse.org/wp-content/uploads/2022/11/The-Middle-East-Pivot-to-Asia-2022-Digital.pdf
● https://www.edb.gov.sg/en/business-insights/insights/investing-for-change-in-southeast-asia-s-golden-era-for-startups.html
● https://services.google.com/fh/files/misc/e_conomy_sea_2022_report.pdf
● https://www.svca.org.sg/publications
● https://en.antaranews.com/news/259081/indonesia-remains-attractive-place-for-technology-investments-study
● https://www.asianinvestor.net/article/vietnam-to-serve-as-a-launchpad-to-the-rest-of-asia-says-vc-expert/481465
● https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=VN-ID
● https://vir.com.vn/vietnam-forecast-to-become-second-largest-economy-in-southeast-asia-by-2036-94270.html
● https://www.vietnam-briefing.com/news/vietnams-electronics-industry-guide-emerging-opportunties.html/
● https://hanoitimes.vn/vietnams-electronics-sector-stands-out-as-attractive-destination-for-global-investment-shift-321963.html.html/
● https://doventures.vc/en/insights/reports/vietnam-innovation-and-tech-investment-report-fy2021
● http://aadcp2.org/wp-content/uploads/AIR2022-web.pdf
● https://www.grab.com/sg/press/others/grab-reports-third-quarter-2022-results/
● https://assets.tokopedia.net/asts/GoTo%203Q%202022%20Results%20(1).pdf
● https://www.bain.com/insights/southeast-asias-pursuit-of-the-emerging-markets-growth-crown/
● https://www.intellinews.com/imf-blog-policymakers-need-steady-hand-as-storm-clouds-gather-over-global-economy-259050/
● https://www.atlanticcouncil.org/blogs/econographics/strengthening-ties-china-and-the-gcc/#:~:text=In%202020%2C%20China%20replaced%20the,trade%20valued%20at%20%24161.4%20billion.
● https://commonslibrary.parliament.uk/research-briefings/cbp-9612/#:~:text=China%20is%20an%20important%20trading%20partner&text=In%202022%2C%20it%20has%20pledged,their%20trade%20with%20the%20US.
● http://wam.ae/en/details/1395303000099
● https://www.china-briefing.com/news/foreign-investment-in-china-august-2022-round-up/
● https://www.statista.com/statistics/188629/united-states-direct-investments-in-china-since-2000/
● https://rhg.com/research/twowaystreet-2021/
● http://aadcp2.org/wp-content/uploads/AIR2022-web.pdf
● https://www.fdiintelligence.com/content/news/developing-asia-to-grow-faster-than-china-for-first-time-in-30-years-81486
● https://techcollectivesea.com/2022/10/07/2022-vc-funding-southeast-asia/
● Preqin
● Crunchbase
● Tech In Asia

27. Some Final Thoughts…
The momentum of FDI continues to shift in favor of the region, and while there is some belt-tightening
and course correction for too-high valuations, SEA stays on track for its winning streak.
2023 will be yet another exciting year for the SEA ecosystem because of the rapid pace of development
and the sheer market opportunity of its upwardly mobile and young population.
More importantly, it will be a time to reflect on these questions that we hope to tackle at the next Vietnam
Venture Summit in 2023:
● What would a deeper depression for global economies look like in SEA?
● What will be the impact of a rising dollar?
● What does a shift away from the metaverse mean for the tech sector?
● What is the impact of the accelerated growth of AI?
● Will chip manufacturing continue to be recession-proof and drive the global economy ahead?
● Till the next Vietnam Venture Summit!

28. Southeast Asia Exit Landscape Report 2.0
VIETNAM VENTURE SUMMIT 2022

29. Southeast Asia Exit Landscape Report 2.0

30. Southeast Asia Exit Landscape Report 2.0
Vietnam Venture Summit Report
Unlocking a New Golden Era for Southeast Asia in the World